Manulife, Sun Life Fall on Ratings, Fed Outlook: Toronto Mover

Manulife Financial Corp. (MFC), Sun Life Financial Inc. (SLF) and other Canadian life insurers plunged amid credit-rating downgrades after Federal Reserve Chairman Ben S. Bernanke said inflation in the U.S. will remain restrained.

Manulife, the country’s largest insurer, fell 3.9 percent to C$12.07 at 12:53 p.m. in Toronto. Earlier, it was down as much as 5.3 percent, the most since Nov. 1. Sun Life, the third- largest Canadian insurer, slipped about 4 percent to C$20.27, its steepest decline since Dec. 19.

The Federal Reserve pledged yesterday to keep interest rates at a record low until at least late 2014. Manulife and Sun Life, both based in Toronto, had their ratings cut to “neutral” from “buy” by Peter Rozenberg, a UBS AG analyst. Moody’s Investors Service downgraded the operating units of Sun Life’s U.S. business to A3 from Aa3.

“The lower-for-longer interest-rate outlook communicated by the Fed puts some pressure on the Bank of Canada to follow suit or risk providing additional fuel to the already strong Canadian dollar,” Sumit Malhotra, a Macquarie Capital Markets analyst, wrote today in a note to clients. He called it “a clear negative for the life insurers.”

The S&P/TSX Life & Health Insurance Index declined 3.2 percent, its biggest drop since Dec. 8, as all six of its companies moved lower. The index includes Industrial Alliance Insurance, Great-West Lifeco Inc. (GWO), Power Corp. of Canada and Power Financial Corp. (PWF), as well as Manulife and Sun Life.

To contact the reporter on this story: Sean B. Pasternak in Toronto at spasternak@bloomberg.net.

To contact the editors responsible for this story: David Scanlan at dscanlan@bloomberg.net; David Scheer at dscheer@bloomberg.net.

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.